Monday, 29 January 2018

In the sporadic debate about a second referendum, Wolfgang Munchau has made some valuable points. Firstly*, he notes that what Simon Jenkins calls the "second referendum adventists" are "as mad as the the flat-earth leavers" and goes on to quote Andrew Duff**, who says

"The EU would not simply say: "great, come back, all is forgiven". Time has moved on. The European Commission has an action plan until 2025. David Cameron's deal will not be revived. On the contrary, the EU will want the UK to recommit to the principle of ever closer union. The UK would need to accept an end to the British rebate, and an end to several opt-outs (Munchau agrees with Duff that this would probably not affect the opt-outs on the euro or Schengen). But the various opt-outs on the charter of fundamental rights, and on a common immigration policy, would all have to go. Oh yes, the UK would be under pressure to join the banking union, too. All these things would have to happen for the European Council and the European Parliament to accept a British revocation."

I've been saying much the same in my posts. Moreover, second referendum advocates seem to assume that the UK could just revoke article 50 unilaterally, but Munchau notes that formal assent of the EU would be required. The UK could appeal to the European Court of Justice, which would probably stop the clock while it ruled, but

"In normal circumstances, stopping the EU clock is an honourable practice and often leads to crisis resolution. When it comes to Brexit, however, almost anything could happen. A hypothetical British decision to stop Brexit in its tracks would be a highly calculated risk."

So none of that is going to happen. While Munchau thinks a second referendum is a total non-starter anyway, he has identified a specific reason he claims only he seems to have pointed out - there can't be one because there isn't a way of drafting a simple question with a yes-no answer:

"The question proposed by advocates of a second referendum - do you accept the withdrawal agreement or do we you want to stay in the EU - does not qualify as people can logically reject both."

Munchau notes that it is impossible to ask a question that is binary, not a repeat of the last one, and that keeps the UK in the EU. Giving more than two options is never considered in a referendum. It's not that the electorate is too dumb for multiple choice, it's more a matter of how the result could be implemented if, as likely, there was no overall majority for the most popular choice. Sure, you could have a single transferable vote system. I was quite a fan of that system when I was a student. But I realised the downsides when I gave my wife and her parents, along with myself, STV ballot papers for us to decide which snack we were going to open: crisps, hoola hoops or quavers I think was the choice (this was the 1970s or 80s youngsters, pringles and doritos didn't exist). The outcome of this real ballot was that no-one got what they really wanted and the scales fell from my eyes.

The real threat to Brexit isn't a second referendum, of course. It's the Lords/Commons but, even more likely, the fact that there isn't a concensus in the Tory party about what the future beyond the transition should look like.

I do worry about the perfect storm of a Brexit collapse and a Corbyn government. Project Fear? Project Apocalypse Now more like!

*The Brexit Revocation Madness, eurointelligence.com, 19 Jan 2018

**Andrew Duff's discussion paper "Brexit: what if Britain changed it's mind?" is published by the EU-funded European Policy Centre at http://www.epc.eu/documents/uploads/pub_8208_brexitwhatifbritainchangesitsmind.pdf?file=pub_8208_brexitwhatifbritainchangesitsmind.pdf

Friday, 19 January 2018

Signing Theo Walcott would appear to materially strengthen Everton's squad. It has been reported that Walcott chose Everton because of Sam Allardyce: Walcott was selected in Allardyce's only England match in charge. (Remember, Everton is the only club whose manager has a 100% record in internationals).

Walcott has not fulfilled the promise that got him a (then) quite big money move to Arsenal aged 16, followed by a call up for England's 2006 World Cup Squad aged 17 a few months later. But he has 47 England caps and over 100 career goals for Arsenal. To put that in context, in Everton's long and glorious history* they have only had five players who have scored over 100 goals while playing for the club. Walcott was Arsenal's 18th. So he is very much a proven Premier League forward.

Yes, Everton have Wayne Rooney, with even more stellar career numbers. But Rooney is 32 and, though both he and Walcott started out young, Rooney has a lot more miles on the clock and never had explosive pace, an important attribute the current Everton squad was pretty well devoid of.

At 28 Walcott could have few good years left. His goal return from games played is significantly better than the departed Kevin Mirallas and the remaining Yannick Bolasie and Aaron Lennon, who have latterly filled the berth most likely for Walcott in the team.

Whether Walcott will improve Everton in practice we shall see, but it is a good acquisition on paper. The fee of around £20 million doesn't seem high for an English player in these times of stratospheric fees. And if it doesn't work out a decent proportion might be recouped, so low risk on the face of it.

So this might well be the first really significant change made by Allardyce since his arrival.

And here's an off the wall idea for further improvement - bring back Jack "The Lad" Rodwell, currently languishing at Sunderland, excluded from the first team squad and training alone 3 times a day, while pocketing his crippling £70k a week wedge which Sunderland would dearly love not to pay - and are only doing so because they failed to insert a relegation clause when they bought him from Manchester City. Sunderland can't cancel Rodwell's contract and can't get anyone to take him off their hands.

Rodwell, who hails from Birkdale and was with Everton from the age of 7 to 21, is still only 26 and was the youngest player to play for Everton in Europe aged 16. He was capped by England at 20 and was spoken of as a future England captain. He moved to Manchester City in 2012 in a big money move which blighted his career, much as the move to Arsenal did for Franny Jeffers and as, I fear, will Ross Barkley's move to Chelsea.

In Everton's academy Rodwell was always seen as a central defender, but he got in the first team very young playing in midfield. He now thinks central defence would be the right role for him. Well, here's my idea. Offer to take him on loan from Sunderland for half his current wages, with a view to taking over his contract by the end of the season if he does well. Play him as a holding midfield player, much as Eric Dier at Tottenham. After all, he can't possibly be any worse than Morgan Schneiderlin. If it does work he provides back up for the centre backs (you need lots of them if you want to play three). We could get him for nothing and offload Schneiderlin for worthwhile bucks. If it didn't work the cost would have been trivial for Everton. And I note that Rodwell appeared a lot for Sunderland when Sam Allardyce was their manager.

And here's another controversial proposal: if Everton can't get either of their preferred target left backs, Aaron Cresswell from West Ham or Luke Shaw from Manchester United, make a deadline offer to take Jon Flanagan from Liverpool for a handful of peanuts. Flanagan has just been sentenced to a 12 month community order for egregiously attacking his girlfriend, has 5 months left on his Anfield contract and is persona non grata there judging by Liverpool's statement after the court hearing. While all this is unsavoury and can't really be excused, Flanagan clearly does not deserve to lose his right to earn a living over it. I've never quite understood why professional sports people are regarded as role models for anything other than their ability to play sport. And so few of them do anything to deserve their unasked for status as role models. Rare exceptions are Juan Mata, who donates one percent of his salary to a global charity and Steven Naismith who, while at Everton, regularly paid out of his own pocket for unemployed fans to have a seat at Goodison.

Before things went off the rails, Flanagan had made 40 appearances for Liverpool, mainly in the season when they so nearly won the league and won one cap for England.

The only problem I see with this idea is that it might be better for Flanagan to make his way somewhere other than Merseyside. But where better to earn redemption? After all Everton's pioneering Everton In The Community programme, which has 140 staff involved full-time in community projects, does a lot of work with young offenders and claims a 76% non-reoffending rate in the first year compared with the national average of 26%. They also run 26 disability sports teams, a free school, a programme to tackle dementia and look after children whose lives have been affected by crime**. A perfect opportunity for a young man who has gone astray to make amends? And again, if it didn't work, by taking him now the cost would be tiny.

*Don't smirk: when I left school no team had won the league more often than Everton and it was only in the mid 1990s that Arsenal and Manchester United joined Liverpool in having materially more league titles. Everton still have 9 league wins to Chelsea's 6 and Manchester City's 4.
**http://www.telegraph.co.uk/sport/football/teams/everton/11337745/Everton-are-a-shining-beacon-for-football-as-a-force-for-good-in-the-community.html

Wednesday, 17 January 2018

The day after Donald Tusk came over all soppy ("Our hearts are still open for you" - oh, do give over! - and stop making mischief) the pro-European academic's blog I am addicted to reading, eurointelligence, carries a good summary today of the status of the debate over a second referendum in a post titled "Labour smashes No Brexit dreams"*. They pick up on what Keir Starmer, Labour's Brexit spokesperson, has said:

“But there are a number of obvious difficulties [with a second referendum]. I don’t think we’re going to know what 'out' looks like [until] 2021 at the earliest. And therefore the only point you’ll be able to measure out is in several years’ time, but we will have exited the EU in 2019; and therefore 'in' is no longer an option.”

And they remind us that the still to come Commons vote is essentially academic:

Many trade-related issues will be left open by the time the UK parliament has its "meaningful vote" on Brexit, a euphemism since the real meaningful decision was to trigger Article 50. The vote cannot undo Brexit - all it can do is trigger the nuclear option of a no-deal Brexit.

However, there is still a debate in Labour about what I call the Hotel California (checked out but never leaving, in the single market and customs union) Norway option, with some MPs arguing that, if Labour came out in favour, it would have a majority in the Commons and country. I'm not sure about that and neither is eurointelligence. They recommend that, to understand "the deeper politics" behind Labour's Brexit endorsement, a blog by "working class academic" Lisa McKenzie is helpful**. It summarises a paper she published in the British Journal of Sociology based on extensive research into working class opinion. In it, she noted that people followed the EU debate in much greater detail than is widely acknowledged. And she comments:

"Working-class Leavers were derided as turkeys voting for Christmas, but it is the middle-class Remainers who have been running around like headless chickens since the vote. Like Henny Penny, they think the sky is falling in, but whether the sky falls in or not, Brexit has made a difference to working-class people dubbed ‘the left behind’. They have become visible for the first time in generations, and to some extent feared."

The working class votes for Brexit in the referendum have certainly made the Labour party think hard at every turn about how to hold its constituency together. Their preference to stay at least half way on the fence about what Brexit should look like means that both the major parties are influenced more by holding themselves together and maximising their chances in the next election, even if it means avoiding serious debate on some of the largest issues the country has faced in our lifetimes.

Never mind - the LibDems, bless them, are prepared to say what they mean. Even if it commands next to no support. That is surely what the other parties fear. So we are left with a government and opposition who won't come clean and are both trying hard not to blink first.

That is actually easier for the government as there is no point in them spelling out something that time proves to be impossible to negotiate with the EU. So they keep taking baby steps forward, feeling their way as they go. To be fair, that's probably all they can do. I once asked a boss of mine, who was in the midst of a fiendishly complex company merger negotiation, how you could ever plot your way through it. "You can't" he said. "All you can do is bear in mind where you are trying to get to in the long term and try make progress in the right general direction in the short term." I thought this sounded very wise and pragmatic at the time, though later I thought it risked leaving "showstoppers" to emerge and kill the deal. Which is why, the EU would say, they identified the showstopper issues for resolution first. Except the Irish issue was fudged - d'oh!

P.S. in case you were wondering (ok, I know you weren't) how did my boss's fiendishly complicated negotiation pan out? After more than a year of negotiations, it collapsed, of course. There was some benefit because not only did I get a major chunk of his responsibilities after he left, I was able to sell our chunk of the proposed merged outfit to the other party. However, it took another 18 months as was total pain of a transaction. When I think about my opposite number in the negotiations I empathise with and have significant sympathy for David Davies.... But the good news was that, despite a lot of scepticism, it worked out well for the employees, just as Brexit can work out well for British citizens in our de-merger.

Monday, 15 January 2018

West Ham (H) won 4-0 (Allardyce seems to count this as his era even though Unsworth was in charge but his appointment could have galvanised the players, so I'll give him this one)
Huddersfield (H) won 2-0
Appollon Limassol (A) won 3-0. Europa League, played a lot of kids against a bunch of Cypriots
Liverpool (A) drew 1-1, very fortunately.
Newcastle (A) won 1-0
Swansea (H) won 3-1
Chelsea (H) drew 0-0
West Brom (A) drew 0-0
Bournemouth (A) lost 1-2 and played badly
Man Utd (H) lost 0-2
Liverpool (A) lost 1-2 but played reasonably well
Spurs (A) lost 0-4, pathetically.

In the first 6 of these 12 matches Everton didn't play that well on the whole, but were tighter defensively, got good results - no defeats - and moved out of trouble in the league. In the second 6 they got a hard fought home draw with Chelsea and put in a decent performance in the Anfield cup tie but otherwise have been just as poor as they were pre-Allardyce. They have lost their best home grown player (maybe best player) since Wayne Rooney's original emergence, Ross Barkley and are slumped back in the league. OK, they are still 9th but 4 points behind the club above whereas they are precariously perched with 6 teams within 4 points of them, the lowest (Newcastle and Brighton) being very much in the relegation fight.

Don't get me wrong, I'm confident Everton will survive in the Premier League this year. After all, with 27 points from 23 matches an average of a point a game from here - normally relegation form - would probably make them safe by several points. And it is still very early days for Allardyce and his team, Craig Shakespeare and the short fat fella whose name I still don't like to mention.

But I question whether, other than the players initially trying a bit harder (I know they get paid a lot but it's human nature) there has been much improvement. The results have been broadly what you might expect. In the first 6 games the fixtures were easy, bar Liverpool away, where they got lucky. West Ham were awful at the time and have improved since; Huddersfield, Newcastle and Swansea some of the weakest ever Premier League sides. In the second six the fixtures have been harder: Chelsea, Man U, Liverpool and Spurs away. The disappointment was only getting one point from the West Brom and Bournemouth matches, even though they were both away.

Over the 12 games I can't see much Allardyce effect in terms of results, it seems to me it's just the way the fixtures have panned out.

The next 6 games are a more mixed bag: West Brom, Leicester and Crystal Palace at home, Arsenal, Watford and Burnley away. Leicester and Palace are looking quite strong recently and West Brom have got their first win in living memory (ok, since August). Watford started strongly but have gone flat, Burnley will still be hard at their place. This run might tell us more.

But it will be ok because we've signed a centre forward, a young (ish)Turk, Cenk Tosun. Won't it?

I hope his arrival helps, but I am worried by a stat that my son pointed out when he was signed. Yes Tosun had scored 8 goals in the Turkish Super-Lig this season. But so has Arouna Kone, who didn't exactly set fires alight in his time at Everton. And Kone is playing for Sivasspor, a weaker team than Besiktas, where Tosun played. Hmmm.

Yesterday against Spurs Tosun looked as if he could throw his weight around a bit and let the centre backs "know he's there". Maybe the idea is to soften them up before bringing on Calvert-Lewin, who looks to have more pace. In which case we need to not be losing 3-0 by that time....

At the moment I'm struggling to see that either Allardyce or Tosun are going to be the saviour, though they may help us to cement mid table safety. Disappointing after the progress of the previous 10 years or so but better than the alternative.

Maybe Everton need a witch doctor*.

*an obtuse reference to the bizarre story that Romelu Lukaku might sue Everton and/or it's major shareholder, Farhad Moshiri, who was quoted as saying that Everton met Lukaku's financial demands and he was 99% certain to sign a new contract until he spoke to a witch doctor (!?). Which upset Lukaku because he's a Catholic. Aaaargh - another snowflake!!

Thursday, 11 January 2018

It's probably jut me, but I had always thought that, when people talked about moving money "offshore" it meant putting money somewhere exotic like the Cayman Islands or Bahamas. OK, or Jersey or the Isle of Man. Well, yes, places like that are used as addresses. And they are just about all British Overseas Territories - why will become apparent below. But the "offshore" actually refers to outside the jurisdiction of the United States. And, if I understand it correctly, the money isn't necessarily held in those places.

London is the world's undisputed global centre for foreign currency trading. I've been reading about how this came about in a piece on the BBC website* which was prompted by the publication of the Paradise Papers a few months ago, when details were published of all sorts of financial transactions which the parties concerned would rather have kept secret. Basically, London achieved this position by accident. Yes, I know London has a geographical time zone advantage, being more easily able to communicate with west and east than they can with each other. Indeed, I read recently that London would be concerned post-Brexit about losing its status not to Frankfurt or Paris but to New York. But only if New York could relocate itself east by 5 hours. But that's not why such a high value of transactions takes place in London.

The story of why and how people with dosh go about avoiding taxes by moving money offshore starts, not surprisingly, around the time of World War I. After all, that is when income tax, which had been around since 1799 (that time the war was against Napoleon) and had been made progressive with the introduction of supertax by Lloyd George in 1909, really took off with higher rates of tax reaching 50%. That lead to wealthy people becoming resident in lower tax Jersey, or putting their money in a trust in the Isle of Man. But it wasn't until the 1950s that London's role became international.

Controls on the movement of money over borders were normal then (Mrs Thatcher scrapped them for the UK three decades later) as speculative money flows were considered to have worsened economic crises. So government approval for, say, Tate and Lyle to invest in a new sugar production facility in Jamaica was required. It was normally a formality but, with a run on the pound under way after Britain, financially weakened almost fatally by World War II, had stumbled into the Suez crisis, the government announced in 1957 that, on a temporary basis, it would no longer approve foreign capital investments. The City's merchant banks were alarmed. Arranging finance for projects in the former colonies was critical to them. How to avoid ruin?

Hearing the banks' complaints in a series of meetings, the Bank of England agreed in late 1957 to allow the commercial banks to continue to lend and borrow to foreign clients on two conditions:

the lending had to be in a currency other than sterling, and

both sides of the transaction - the lender and the borrower - had to reside somewhere other than the UK.

"The decision was momentous in all respects," says one of the leading experts in offshore finance, Prof Ronen Palan of City, University of London. "They simply deemed certain transactions as not taking place in the UK. Where did the transactions take place for regulatory purposes? Nowhere. "I think it wasn't at all by design; it was a mistake. They didn't understand the implications. It was seen as an accounting device." The so-called "Eurodollar" was born - a global offshore financial market, transacting in dollars and allowing unlimited sums to be borrowed and lent, but under the control of no single state. No act of Parliament (or Congress) sanctioned the decision. There was no thoughtful policy-making, no careful debate.

The Treasury was at first left in the dark. But within years the implications were obvious - this could revive the City of London's fortunes. "By the time the Treasury figured it out, they thought, 'this is good business for the City'," said Prof Palan. Banks from all around the world could borrow and lend in dollars without being subject to US tax or banking regulations - making banking in dollars more profitable out of London than out of Wall Street. Offshore banks didn't have to hold money in reserve for every dollar they lent (as they would in the US), which would dramatically cut their costs.

While transactions were arranged in London, the lenders and borrowers could be registered anywhere. But the parties to Eurodollar transactions needed addresses. So, zero-tax jurisdictions from the Cayman Islands to the Montserrat were used by London's investment banks as the official tax residences of their wealthy customers. Clients could avoid both tax and undesirable scrutiny - for example from the US tax authorities.

Don't knock these places - they don't need to have higher tax rates, else they would just run up huge budget surpluses or have to give citizens not just free prescriptions but free Rolls-Royces. In the British Overseas Territories, local laws were passed to attract more registration business, collecting modest fees that mounted up. No need for a bank branch out there - just a drawer in an offshore lawyer's filing cabinet. Again perfectly sensible. And why would they need sackfuls of regulations when there isn't much activity there to regulate?

Nevertheless there were howls of protest from the US government, which were ignored. Between 1960 and 1970, the size of the Eurodollar market went from $1bn to $46bn and then exploded to to more than half a trillion dollars by 1980, driven by countries rich in "petrodollars" from the hike in oil prices.

After the deregulation of the City of London in the 1986 "Big Bang", US banks joined in, setting up in London. And as the 1990s and 2000s progressed, London became the undisputed global centre for foreign currency trading.

So, if I've got this right (and I might not have 100%) "offshore" companies are only using the Cayman, British Virgin, or other Islands as an address. The money doesn't actually ever go there. I suppose it might often stay in London. And it's why London is the centre of "offshore" for the world. Don't knock it: we take a "cut" in the form of taxes on the companies and people doing the work. But it does sound a bit dodgy, doesn't it?

After all, tax-free, light regulation jurisdictions, including the Bahamas, the Cayman Islands (oh and Delaware in the US) became the corporate locations of choice for legitimate hedge funds. But they were also used to incorporate the vehicles at the heart of the global financial crisis - the 'structured investment vehicles' that did not show up on bank's balance sheets and bought billions of mortgage-backed securities, massively increasing the unnoticed risks in the global financial system which led to the crisis of 2008.

The other thing that we read a lot about is hot money coming into London property. It is estimated that there are more than 36,000 properties owned by anonymous offshore companies in London. The rather useless BBC item in which I found this stat didn't make clear how many of these were domestic rather than company offices, but it did say that included 7.3% of properties in Kensington and Chelsea and nearly 10% in Westminster**.

Indeed, in 2016 nearly 18% of completed new build domestic property completions were to overseas buyers. However, nearly half of these were to people buying with a mortgage, with one analyst suggesting that research suggested that buyers are largely "not ultra-wealthy overseas Russian oligarchs or from Middle Eastern oil money." Three-fifths of all overseas sales in London were made by people or companies from just four countries in south-east Asia: Hong Kong, Singapore, Malaysia and China. "It’s the newly emerging middle classes in Asia getting in on this, who are not any wealthier or poorer than those [British] first-time buyers looking to buy." This is partly because of a rising trend of south-east Asian buyers getting mortgages in their home countries to buy off-plan property in the UK.So just how big an issue people using a company as a front for buying into the London property market isn't clear to me. I've also read that suggestions many such properties are left vacant is tosh - they are nearly all rented out. But all of this makes me think I understand a bit more about why many countries think London is a capital of money-laundering. And arguably it's London that is, apparently by accident, the offshore capital of the world.

Wednesday, 10 January 2018

It seems a long time since I wrote about music: 26 October 2017 and Keith Emerson, actually. While gearing up to write the next in my series, and while I'm still struggling to upload my own mp4 snippets, here are some links to examples of the best keyboards player I've ever seen playing live, playing live. His weapon of choice was the Hammond organ or Moog synthesiser but some of his best stuff was on the grand piano. A quick listen to the first 20 seconds or so of this 12 minute long live version of Hang On To A Dream from The Nice's album Elegy (so called because it was released after they split) will tell you a lot about Emerson's ability and fluency:

https://www.youtube.com/watch?v=vSn28o6wm2c

But why not listen to the full 12 minutes as the long extemporised middle section has Emerson taking a swing through boogie woogie and other piano styles, including pratting about inside the lid of his grand piano scraping a microphone across the strings. Which is much better than I make it sound and well worth you checking out.

There is of course loads of other stuff on youtube. Emerson playing a piano duet with jazz legend Oscar Peterson (https://www.youtube.com/watch?v=ZvQIobg0BwU) caught my eye (and ear).

The group and orchestra version of Sibelius's Karelia Suite that I mentioned (16 October 2017 post) is also on youtube at https://www.youtube.com/watch?v=HvuoWhTJbPA.

And both the studio version of Emerson's 3 piece band playing their remarkable take on Tchaikovsky's Symphony no 6 (Pathetique) 3rd movement and a live recording of the same piece with band and orchestra are at
https://www.youtube.com/watch?v=xLD-45mtCWk (for some reason this starts with 20 seconds of silence) and
https://www.youtube.com/watch?v=bIoPd95fCQA
But, if you aren't familiar with the classical piece, it's the comparison of a standard orchestral performance of the piece with the 3 piece rock band that is astounding. For example, Karajan conducting at https://www.youtube.com/watch?v=bviS_Wt3L6M. Paraphrasing what I said before, how Emerson produces something that sounds remarkably redolent of the range of simultaneous melodies of a full orchestra on just his keyboard backed by bass and drums is a wondrous feat.If I knew how to mix them for you I would....